Date Of Judgment 31-08-2018, Ita v. M/S. Mindtree Ltd

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 31[ST|]DAY OF AUGUST 2018. PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS.JUSTICEK S.SUJATHA I.T.A. No.263/2018 BETWEEN : 1.THE COMMISSIONER |OF INCOME-TAX, LIU.OF INCOME-TAX, LIU. "[‘T]FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANGALA, BENGALURU-560095.. «|THERE DEPUTLY COMMISSIONEOF INCOME-TAX, LTV, OF INCOME-TAX, LTV, "[‘T]FLOOR, BMTC BUILDING, 80 FEET ROAD, KORMANAGALA, BENGALURU-56095. . APPELLANTS| (BY SRI DILIP, ADV. FOR SRI ARAVIND.K.V., ADV.) AND ; M/s. MINDTREE LTD,(FORMERLY KNOWN AS KYOCERA|WIRELESS (INDIA) PVT.LTD.,]GLOBAL VILLAGE, RVCE POST, MYSORE ROAD,BENGALURU-5600059PAN: AACCK 1293L. _. RESPONDENT. THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 22.09.2017 PASSED IN IT|TP|A No.1662/BANG/2013,.FOR THE ASSESSMENT YEAR: 2007-2008, VIDE ANNEXURE-D, Date of Judgment 31-08-2018, ITA No.263/2018 The Commissioner of Income-tax & Another Vs. M/s. Mindtree Ltd., PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF|LAW STATED ABOVE. Il. ALLOW THR APPEAL AND SKIT ASIDETHRE ORDERS PASSED BY THE INCOME-IAX APPELLATETRIBUNAL,|BBENGALURUIN|IT|TPIANo.1662/BANG/2013DATED: 22.09.2017, VIDE ANNEXURE-D, CONFIRMING THE)ORDER OF THR APPBELLATKE COMMISSIONBR AND CONFIRTHR ORDEBR PASSBD BY THR DBPUTY COMMISSIONER OFINCOME TAX, LTU, BENGALURU. THIS APPEAL COMING ON FOR ORDERS, THIS DAY,|S. SUATHA, J., DELIVERED THE FOLLOWING: JU DBiGMENT Mr. Dilip,Adv. torMr. Aravind.K.V.,,Adv. for Appellants — Revenue. This Appeal is filed by the Revenue purportedlyraising substantial questions of law arising from theOrder of the Income Tax Appellate Tribunal, Bangalore Bench ‘B’, Bangalore, inIT[TP|A No.1662/Bang/2013 dated|23.09.2017, relating to the Assessment Year 2007-08. ? The substantial question of law framed by the Revenue in the Memorandum of Appeal is as under: “WhetherOTFthe factsandin|thecircumstances of the case, the Tribunal is right inlaw in setting aside the findings of the AssessingAuthority relating to inclusion of foreign travel Date of Judgment 31-08-2018, ITA No.263/2018 The Commissioner of Income-tax & Another Vs. M/s. Mindtree Ltd., 3/5 expenses, professional expenses and _ brancoffice expenses incurred in foreign currency fromexport turnovers well as from total turnover forthe purpose of computing deduction under SectionIOA of the Act by following the decision of thisHon’ble High Court in the case of CIT vs. TataElxs1P” 3.The issue is covered by the decision of theHon’ble Supreme Court in the case of|Commissioner of Income-tax, Central - III vs. HCL Technologies Ltd.,[2018] 93 Taxmann.com 33(SC). 4The relevant portion of the judgment of theHon'blesupremeCourtin.theCaSE€oT|HCL|Technologies Ltd. (supra),is quoted below for readyreference:-. “17. The stmilar nature of controversy, akinthis case, arose before the Karnataka High CourtinCIT v. Tata Elxsi Ltd. [2012] 204 Taxman|3S21/17/taxman.com 100/349 ITR 98. The issuebefore the Karnataka High Court was whether|the Tribunal was correct in holding that while|computing relief under Section IOA of the IT Act, Date of Judgment 31-08-2018, ITA No.263/2018 The Commissioner of Income-tax & Another Vs. M/s. Mindtree Ltd., the amount of communication expenses should beexcluded from the total turnover tf the same arereduced from the export turnoverP While givingthe answer to the issue, the High Court, inter-alia,held that when a particular word is not definedby the legislature and an ordinary meaning 1s tobe attributed to it, the said ordinary meaning is tobe in conformity with the context in which it isused. Hence, what is excluded from ‘exportturnover’ must also be excluded from ‘totalturnover’, since one of the components of ‘totalturnover’1Sexportturnover.Anyotherinterpretation would run counter to the legislativeintent and would be impermissible. | 1S. XXXXXX Date of Judgment 31-08-2018, ITA No.263/2018 The Commissioner of Income-tax & Another Vs. M/s. Mindtree Ltd., the amount of communication expenses should beexcluded from the total turnover tf the same arereduced from the export turnoverP While givingthe answer to the issue, the High Court, inter-alia,held that when a particular word is not definedby the legislature and an ordinary meaning 1s tobe attributed to it, the said ordinary meaning is tobe in conformity with the context in which it isused. Hence, what is excluded from ‘exportturnover’ must also be excluded from ‘totalturnover’, since one of the components of ‘totalturnover’1Sexportturnover.Anyotherinterpretation would run counter to the legislativeintent and would be impermissible. | 1S. XXXXXX 19, In the instant case, if the deductions onfreight,telecommunicationand|insuranceattributable to the delivery of computer softwareunder Section 10A of the IT Act are allowed onlyin Export Turnover but not from the TotalTurnover then, it would give rise to inadvertent,unlawful, meaningless and illogical result whichwould cause grave injustice to the Respondentwhich could have never been the intention of thelegislature. Date of Judgment 31-08-2018, ITA No.263/2018 The Commissioner of Income-tax & Another Vs. M/s. Mindtree Ltd., 20. Even in common parlance, when theobject of the formula ts to arrive at the profit fromexport business, expenses excluded from exportturnover have to be excluded from total turnoveralso. Otherwise, any other interpretation makesthe formula unworkable and absurd. Hence, weare satisfied that such deduction shall be allowedfrom the total turnover in same proportion aswell”. 5.Having heard the learned counsel appearing for the Appellants-Revenue, we are therefore of theopinion that no substantial question of law arises in the present case. The Appeal filed by the Appellants-Revenue is liable to be dismissed and it is dismissed|accordingly. No costs. Copy of this Order be sent to the Respondent-Assessee forthwith. NC, Sd/-.JUDGE| Sd/-.JUDGE|